The banking crisis took a nasty turn for the worse tonight, sending shares tumbling on both sides of the Atlantic.

A leading economist said a major US bank will fail in the next few months and warned the worst of the global financial turmoil is yet to come. Alliance & Leicester added to the woe with a stark warning that it faced serious difficulties outside its control if shareholders reject the takeover planned by Banco Santander of Spain.

The Dow Jones Average sank 117.2 to 11,362.2 in New York and the FTSE 100 index was down 112 at 5338.2. London's blue-chip stocks lost £24 billion of their value, with banks off as much as 6%.

Former International Monetary Fund chief economist Kenneth Rogoff said: "The US is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say 'the worst is to come'.

"We're not just going to see mid-sized banks go under in the next few months, we're going to see a whopper, we're going to see a big one, one of the big investment banks or big banks.

"We have to see more consolidation in the financial sector before this is over. Probably Fannie Mae and Freddie Mac, these giant mortgage guarantee agencies, are not going to exist in their present form in a few years."

Lehman Brothers fell more than 4% after analysts at JPMorgan said it may post a third-quarter loss, with about $4 billlion (£2.14 billion) in writedowns.

In London, A&L urged its shareholdersto support the £1.3 billion takeover by Santander. A&L acting chairman Roy Brown said the bank would be exposed to the worsening economic slowdown if the deal did not go through.

"There remain significant external risks presented by the deterioration in the broader economic outlook and the continuing turbulence in financial markets," he said.

"The board also recognises the risk that further shocks to the financial system created by unfavourable developments at other financial institutions could generate widespread general adverse sentiment towards financial groups like A&L."

A&L shares fell 14¾p to 319¾p while HBOS sank 19p to 280½p, Royal Bank of Scotland lost 12½p to 216p, Lloyds TSB shed 15p to 291p and Barclays dropped 15¾p to 327p.